W&T Offshore Inc. reported a loss of 8 cents per share in Q2 2025, which is better than the expected 14 cents loss but worse than last year’s 5 cents loss. Quarterly revenues fell to $122.4 million, below the estimated $137 million and down from $143 million last year. The improved earnings came from lower operating expenses, but these were countered by reduced production and lower oil-equivalent prices. Production for the quarter averaged 33.5 MBoe/d, down from 34.9 MBoe/d last year and below the expected 34.5 MBoe/d. Oil production dropped to 1,259 MBbls from 1,382 MBbls, missing the estimate of 1,427 MBbls. Natural gas liquids output was 245 MBbls, down from 334 MBbls but above the estimate of 226 MBbls. Natural gas production rose to 9,285 MMcf, higher than last year’s 8,769 MMcf and the estimated 8,897 MMcf. The average realized oil price was $63.55 per barrel, a decline from last year’s $80.29 and below the estimate of $65.57. NGL prices fell to $19.24, while natural gas prices rose to $3.75. Lease operating expenses increased to $25.20 per Boe. Net cash from operations reached $27.9 million, down from $37.4 million. Free cash flow also fell to $3.6 million. W&T Offshore invested $10.4 million in resources and had $120.7 million in cash, with net long-term debt at $350.1 million as of June 30, 2025. The company expects production levels to remain unchanged for Q3 and the entire year. Operating expenses for Q3 are projected to be between $71.5 million and $79.3 million, with total annual expenses estimated at $280 million to $310 million. Capital expenditures are forecasted at $34 million to $42 million. Currently, W&T Offshore has a sell recommendation. Other energy sector options, such as Antero Midstream and Enbridge Inc., are rated more favorably with buy recommendations. Today is August 5, 2025. Although W&T Offshore’s loss was smaller than expected, we are concerned about missed revenue and oil production targets. The company’s struggle to meet top-line goals and declining production points to fundamental weaknesses. Any short-term price increase from the better-than-expected earnings should be viewed with caution, as the overall business performance is declining. The realized oil price of $63.55 per barrel is particularly worrying. As of today, WTI crude futures for September delivery are trading around $68 per barrel, which means W&T is receiving much lower prices than the market benchmark. This could indicate issues with their hedging program or the quality of their crude oil, worsening the effects of falling commodity prices compared to the $80.29 they received last year. Looking ahead, the forecast for stable production does not suggest any immediate improvement. This stagnation follows a decline in production over the past year, highlighting a troubling operational trend. Combined with rising lease operating expenses, we see a clear path toward continued margin pressure. Given this situation, we think that buying put options is a sensible strategy for the coming weeks. The stock has underperformed relative to the broader energy sector since early 2024, and this report doesn’t change that outlook. We are considering put options that expire in October and November 2025 to allow our bearish forecast to develop. We also expect the stock’s implied volatility to decrease now that the earnings report is behind us. This creates an opportunity to sell option premiums, like through bear call spreads. The flat production guidance suggests a low likelihood of sudden positive surprises, making strategies that benefit from stagnant or slowly declining stock prices appealing.

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